One Factor Gaussian Copula Model

Anna Schlösser ()
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Anna Schlösser: Hedging and Derivatives Strategies

Chapter Chapter 4 in Pricing and Risk Management of Synthetic CDOs, 2011, pp 95-127 from Springer

Abstract: Abstract This chapter introduces the basic framework for synthetic CDO pricing and the popular one factor Gaussian model of correlated defaults. The central results for the analytical calculation of the portfolio loss distribution under the assumption of the large homogeneous portfolio are presented and generalized for arbitrary distributions. Further, we discuss the problems of the one factor model with the Gaussian distribution, as well as the attempts to fix them with the help of implied and base correlations.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-642-15609-0_4

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DOI: 10.1007/978-3-642-15609-0_4

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